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HM Treasury publishes ‘Phase 1’ consultation on consumer credit reform, and response to feedback on plans to regulate BNPL

Earlier today, on 19 May 2025, HM Treasury published:

– a press release and a ‘Phase 1’ consultation paper on reform to the Consumer Credit Act 1974;

– an update to its consultation and its response to the feedback to its consultation on regulating buy-now, pay-later products (BNPL); and

– a news story on its proposals to regulate buy-now, pay-later.

The ‘Phase 1’ consultation on reform seeks views on information requirements, sanctions and criminal offences. The deadline for responding is 21 July 2025.

On BNPL, HM Treasury “intends to lay the [statutory instrument] before Parliament shortly after this responsible is published”. Once the SI is made, the FCA will then have 12 months to draft, consult on, and finalise its rules for BNPL Lending. BNPL products will then be regulated from mid-2026. The FCA will shortly publish a consultation on its rules.

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Advertising Standards Agency bans a diesel emission claims ad implying an association with, or endorsement by, the UK Government

On 16 April 2025, the UK Advertising Authority (the ASA) published a decision on whether a post on X (formerly Twitter) about claims relating to diesel emissions published by Cambridge Corporate Consultants Ltd t/a The Claims Guide (The Claims Guide) was misleading. The ASA decided it was. 

The post on The Claims Guide’s X post stated: “Owned a BMW, Citroen, Ford, Peugeot, Volvo, or Jaguar & Land Rover diesel car? Manufacturers are accused of cheating emissions tests […] Over £193 MILLION has been paid. Find out if you qualify”.

The post included an image of black text on a white background that stated: “Diesel Emissions Claims […] Make a claim Drivers can potentially make a diesel emissions claim if they owned or leased a diesel car Claims are expected to [sic] worth up to £10,000 each […] Eligibility is dependent on the exact make and model, so should be checked using the official reg checker” and “Check Your Car In Seconds. Get Up To £10,000 With A Diesel Claim”. The post linked to a page of the The Claims Guide’s website headed “Diesel Emissions Claims”. 

The ASA challenged whether the ad misleadingly implied that The Claims Guide was associated or endorsed by the UK Government. 

The Claims Guide’s response was that “any implication of association with or endorsement by the UK Government was unintended”. 

The ASA upheld the challenge. It decided:

– the image had the same “typography, the black and white colour scheme, and simple layout” as the Government’s website;

– these elements (and others) were “distinctively associated with the GOV.UK website and therefore would give consumers the impression that the company “The Claims Guide” was officially approved, endorsed or authorised by the Government to help consumers make diesel emission claims”;

– this was reinforced by the reference to “the official reg checker”(when there was no such checker). 

The advert was therefore banned because it “implied that The Claims Guide was approved, endorsed or authorised by the UK Government, and that was not the case”.

This is a useful and robust decision from the ASA. It ensures the advert cannot be used again by The Claims Guide. But there are many similar adverts on social media, often linked to diesel emissions or motor commissions. Firms who advertise in such a way, or make other misleading claims, may therefore face engagement from the ASA along with their own regulator. 

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Butterworths Financial Regulation Service – updated commentary on CONC published

Issue 139 of Butterworths Financial Regulation Service has now been published. I’ve reviewed and revised Chapters 1 to 4 (covering the introduction, and CONC 1 to 3) and Chapters 10 to 16 (covering CONC 9 to CONC 15) of Division H of Volume 4. This commentary is up to date as at October 2024.

The changes include:

– re-writing the existing commentary in Chapter 1 to consider some key areas of focus for the Financial Conduct Authority including (a) financial promotions and (b) supporting borrowers in financial difficulties;

– updating the commentary on CONC 3 to deal with the FCA’s recent social media guidance;

– revising the guidance on CONC 14 to explain the background which led to those provisions; and

– updating the text to consider the impact of the consumer duty.

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HM Treasury publishes a policy paper setting out a new approach to ensure regulators, and regulation, support growth

On 17 March 2025, HM Treasury published a policy paper and a news story setting out a new approach to ensure regulators, and regulation, support growth.

HM Treasury says it will overhaul the regulatory system so that it:

– supports growth;

– is targeted and proportionate;

– is transparent and predictable; and

– adapts to keep pace with innovation.

HM Treasury says that its reforms “will apply to all bodies exercising regulatory powers and functions“. This will therefore include the UK Financial Conduct Authority and the UK Prudential Regulation Authority.

The proposed actions are:

– action 1: tackling complexity and the burden of regulation (which includes consolidating the Payment Systems Regulator mainly within the FCA);

– action 2: reducing uncertainty across the regulatory system (HM Treasury will look to review the number of the PRA’s and FCA’s “have regards” to identify opportunities to rationalise them and ensure a focus on their priorities; it will ensure the Financial Ombudsman Service is “set up in such a way that it works well for consumers, small businesses and for financial services firms” and reviewing some of the key criticisms of the Ombudsman); and

– action 3: challenging and shifting excessive risk aversion in the system (the review will hold regulators to account for their performance and reduce administrative costs; the aim is to strike the right balance between consumer protection and growth).

There are some key regulator pledges at Annex A. The FCA’s pledges, and the PRA’s pledges, are:

FCAProvide a dedicated case officer to every firm within the FCA’s regulatory sandbox.
FCAProvide 50% more dedicated supervisors to early and high growth firms, to help them navigate the regulatory system and support their growth.
FCAExtend pre-application support to all wholesale payments, and crypto firms.
FCAIndicate more often that the FCA is ‘minded to approve’ start ups to help them secure funding.
FCASimplify its mortgage and advice rules to support greater home ownership.
FCAWelcome FCA work to review the contactless payment limits, including removing the £100 limit on individual payments.
FCAAccelerate a review of capital requirements for specialised trading firms.
FCA + PRAHMT will review the FCA’s and PRA’s ‘have regards’ to rationalise them and ensure a focus on their priorities.
FCA + PRAReduce regulatory reporting requirements for firms.
PRAThe PRA will consult this April on a matching adjustment investment accelerator aimed at reducing the time between life insurers identifying a productive investment opportunity and making that investment.

This announcement marks an important step forward in achieving a proportionate financial services regulatory system which works for both firms and for users of the services provided by firms. The devil is, of course, always in the detail and firms will no doubt be keeping a close eye on future annoucements.

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FCA issues statement on its next steps in its motor finance review

Earlier today, on 11 March 2025, the UK Financial Conduct Authority (the FCA) published a statement on its next steps in its motor finance review. The FCA says:

– If, taking into account the Supreme Court’s forthcoming decision on the appeal from the Court of Appeal’s decision in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282, it concludes motor finance customers have “lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme“;

– Under a redress scheme, “firms would be responsible for determining whether customers have lost out due to the firm’s failings. If they have, firms would need to offer appropriate compensation. We would set rules firms must follow and put checks in place to make sure they do“;

– The FCA no longer plans to make a further announcement in May 2025. Instead, the FCA will confirm its position “within 6 weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward“; and

– The FCA’s next steps on non-discretionary commission arrangements will also be informed by the Supreme Court’s decision.

There are some interesting points from this statement:

– The statutory test under Section 404 of the Financial Services and Markets Act 2000 refers to it appearing to the FCA “that there may have been widespread or regular failure by relevant firms to comply with requirements applicable to the carrying on by them of any activity“. The FCA’s statement that it may (depending on the circumstances) consult on such a scheme is therefore a simple re-statement of part of the test for a consumer redress scheme under the statutory provisions.

– It is unsurprising that the FCA will not make an announcement in May 2025: this seemed inevitable once the lenders were given permission to appeal by the Supreme Court in December 2024.

– There is no mention of the appeal to the Court of Appeal from the High Court’s decision in R (Clydesdale Financial Services Limited) v Financial Ombudsman Service [2024] EWHC 3237 (Admin). This has a ‘hear by’ date of 8 December 2025 and the Court’s consideration of the FCA’s rules and guidance in the Consumer Credit Sourcebook must (it is submitted) be part of the FCA’s wider consideration of whether there has been “widespread or regular failure“.

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FCA proposes to extend the time firms have to handle motor finance commission complaints

Earlier today. on 21 November 2024, the UK Financial Conduct Authority (the FCA) published a press release and a consultation paper setting out its proposals for further changes to complaint handling rules for motor finance commission complaints.

In broad terms:

– the FCA proposes to extend its current rules in DISP Appendix 5 to motor finance non-discretionary commission arrangement (or a DCA) commission complaints;

– the FCA is consulting on two proposals meaning there would be a pause for issuing a final response letter on a non-DCA motor commission complaints to either (a) 4 December 2025 (to align with DCA motor commission complaints) or (b) 31 May 2025;

– the FCA says it will set out its next steps on discretionary motor finance commission complaints in May 2025 and proposes to set out its position on non-discretionary motor finance commission complains at the same time (as it believes that the Supreme Court will have made a decision on whether to give permission to appeal in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282 by then); and

– the FCA proposes to extend the time to refer a complaint about a non-DCA motor commission complaint to the Ombudsman Service until the later of 15 months from a final response letter, or 29 July 2026.

The deadline for responding to the consultation is 5 December 2024. It is likely that new rules and guidance will be made shortly afterwards.

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Financial Conduct Authority publishes two ‘Dear CEO’ letters on authorised push payment fraud reimbursement

On 7 October 2024, the UK Financial Conduct Authority (the FCA) published two ‘Dear CEO’ letters setting what it expects firms to do on authorised push payment (often called ‘APP’) fraud reimbursement. The letters are addressed to:

– banks and building societies; and

– payment and e-money institutions.

These letters quickly follow the Payment Systems Regulator’s policy statement, PS24/7, which was published on 3 October 2024 setting out new maximum reimbursement limits for APP fraud victims at £85,000 (which followed the Payment Systems Regulator’s press release and consultation on 4 September 2024). That decision came into force on 7 October 2024.

The Dear CEO letters set out the FCA’s expectations. These include:

– Anti-fraud systems and control: Firms should have effective governance arrangements, controls and data to detect, manage and prevent fraud, and regularly review their fraud prevention systems and controls to ensure that these are effective. Firms should also maintain appropriate customer due diligence controls (both at onboarding and throughout the relationship).

– Consumer duty: There is a perhaps unnecessary reminder that the consumer duty requires firms to avoid causing foreseeable harm. There is an example of such harm: a consumer becoming victim to a scam where a firm has inadequate systems to detect and prevent scams.

– On us APP fraud reimbursement: Where there are internal transfers (often called “on us” or intra-firm payments) which do not use an external payment system, the FCA is concerned that consumers may not understand that a different (and lower level) protection will be provided. Firms are required to ensure their approach complies with the consumer duty.

– Capital and liquidity: for payment and e-money institutions, the FCA reminds firms to recognise and manage their potential liability and the impact APP fraud may have on their capital and liquidity.

– Systems and controls: the FCA says firms must ensure that they have appropriate oversight, systems and controls in place to comply with its requirements.

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FCA makes rules and guidance extending pause for handing complaints about motor finance discretionary commission arrangements

On 24 September 2024, the UK Financial Conduct Authority (the FCA) published a press release and Policy Statement 24/11: ‘Extending the temporary changes to handling rules for motor finance complaints’ (PS24/11). PS24/11 effectively implements the changes proposed by Consultation Paper 24/15: ‘Extending the temporary changes to handling rules for motor finance complaints’.

The changes to DISP Appendix 5 come into force 26 September 2024.

The key changes are:

– the pause on the requirement for firms to provide a final response to DCA complaints within 8 weeks, giving complainants the right to go to the Financial Ombudsman (which was due to end on 25 September 2024) will be extended to 4 December 2025 (see DISP App 5.2.1R(2));

– there are new requirements on keeping consumers informed about the pause (see DISP App 5.2.5AR to DISP App 5.2.5CR);

– the timeframe for consumers who receive a final response on relevant complaints to decide whether to refer their complaint to the Financial Ombudsman is extended to 29 July 2026 (at the earliest) (see DISP App 5.2.9R(3)); and

– requirements to maintain and preserve relevant records will remain in place until 11 April 2026 (see DISP App 5.3.1R(2)(b)).

There are some interesting points for firms:

– the FCA makes it clear that PS24/11 is relevant to “motor finance providers” and “motor finance credit brokers, including motor dealers“;

– the FCA’s view is that neither the original pause, nor these changes, “prevent consumers or their representatives from … taking legal action“;

– the ongoing judicial review (which is due to be heard between 15 and 17 October 2024), and the Court of Appeal cases dealing with commissions (where judgment is reserved), are relevant to the FCA’s decision making; and

– because “many motor finance agreements involving DCAs were made, or ended, more than 6 years ago, it is likely that the 3-year rule [on time-barring] will be more relevant for consumers“.

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Payment Systems Regulator publishes new Powers and Procedures Guidance

On 20 September 2024, the UK Payment Systems Regulator (the PSR) published an updated version of its guidance entitled ‘Powers and Procedures Guidance’. Section 96 of the Financial Services (Banking Reform) Act 2013 requires the PSR to published guidance.

The guidance updates the PSR’s guidance which was first published in 2015 (and updated in 2020). The PSR’s response paper sets out the changes. These updates include:

– changes to paragraph 5.7 of the guidance: dealing with the process for opening an investigation; and

– changes to paragraph 5.12 of the guidance: dealing with flexibility for staff deployed on monitoring or enforcement to work across functions.

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FCA consults on further pause for handing motor finance discretionary commission arrangements

🚨 Earlier today, on 30 July 2024, the FCA published a consultation paper entitled ‘CP24/15 – Extending the temporary changes to handling rules for motor finance complaints’ and a press releaseproposing to extend the current pause to the time that firms have to respond to motor finance complaints about discretionary commission arrangements.

📆 The FCA says it proposes to set out its next steps in May 2025 (and not September 2024).  By then, the FCA says it’ll have analysed: (a) the data it has collected from motor finance firms and (b) the outcome of Barclays’ judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint.

✋ The proposed pause to 4 December 2025 will allow the FCA to (for example) consult on a redress scheme or ask firms to deal with motor finance complaints relating to discretionary commission models.  Firms will not be required to respond to such complaints before 4 December 2025.

📝 The FCA also proposes to give consumers until the later of 29 July 2026, or 16 months from the date of their final response letter, to refer any complaint to the Financial Ombudsman Service.

👨‍💻 The deadline for responding to the consultation is 28 August 2024.